Thermal Power Plants
Across all industries, demand for power is increasingly directed towards small and medium-sized construction projects, as well as modernization and services.
Thermal power plants - Difficult order situation
The industrial plant engineering sector continues to face difficult times due to massive uncertainties in the market, which lead to delays in investments and other decision processes. The industry is heavily dependent on a stable market and political environment and is therefore particularly sensitive to these uncertainties. The investment climate in power plant construction has thus deteriorated significantly in Germany and on foreign markets. Instead of initiating urgently needed major projects for power plants of the latest technology, many projects are postponed or not realized at all.
The figures of the VDMA Large Industrial Plant Manufacturers´ Group show that orders have recently increased significantly (+21% in 2019 compared with 2018). Within Europe, however, bookings are rather for small to medium-sized projects. Large orders mostly came from the US, Russia, China and Singapore.
Energy demand continues to rise
A positive aspect for power plant construction is that the worldwide demand for energy continues to rise, regardless of the political and economic climate. For 2028, GE’s Global Power Outlook predicts a demand of 33,443 Terawatt hours (TWh) of energy output, which represents a worldwide increase of about 26% (6,728 TWh) compared to 2018. A closer analysis reveals a geographically differentiated picture. Emerging markets such as China, India, Mexico and Nigeria still show significantly lower per capita consumption than established industrialized countries such as the front-runner USA. The ongoing industrialization of these threshold countries will therefore lead to an even greater global demand for energy.
Just as diverse as per capita consumption is the range of primary energies used. Both in Germany and worldwide fossil fuels continue to dominate the energy market. At the same time, the companies are pushing measures to facilitate the transition into a system, that is – at least in the medium term – dominated by regenerative energies.
The path to decarbonization varies from country to country and some regions are progressing faster than in others. The general trend seems to be irreversible, however, and is characterized by the following features:
- The dominating role in electricity generation will in future fall to renewable energies.
- The importance of coal will steadily decline.
- Gas and nuclear energy will continue to grow slightly in absolute terms, although their relative importance will decline.
This statement also applies to countries whose energy demand is particularly high. For example, the share of coal in Chinese energy production has fallen below 60% for the first time in 2019, despite a higher overall consumption. At the same time, renewable power plant output is approaching the 40-percent-mark. This development is also reflected in the demand for power generation facilities.
Coal as part of the energy transition
Coal-fired power generation is still an important source of electricity generation. Projected figures for 2028 still foresee a global market share in electricity generation of around 30%, compared to 38% in 2018. Most new power plants will be built in emerging economies such as China, India and Southeast Asia and will be equipped with the best available technology.
Local authorities in emerging markets also recognize the need for renewable energy. However, they also insist on the need for stable and economic base-load generation. For example, India has invested heavily in environmental protection technology for existing and new coal-fired power plants in order to preserve coal as a pillar of economic growth, while building renewable energy capacities on the basis of wind and solar power.
In the developed markets, carbon capture and storage (CCS) technology and some forms of carbon tax credits could support existing coalfired power generation as relatively clean and econmic forms of energy.
Renewable energy on the rise
It is undisputed that renewable energies are the fastest growing category in the energy sector. In the current GE Global Power Outlook, the sector will be the largest single factor in electricity generation by 2028. This is because installation costs in this segment have already fallen sharply and will continue to fall. The amount of renewable energy will increase from 6,781 TWh in 2018 to 12,189 TWh in 2028. This represents an increase from about 25% to about 36% of total electricity production.
This is also reflected in the mix of orders in plant construction. Three-quarters of the new plants can currently be allocated to renewable energies. Photovoltaic systems are the most strongly represented, with growth of around 100 GW, followed by plants for energy generation from wind and hydroelectric power.
However, an energy system that is largely based on renewable energy sources requires some additional precautions to compensate for generation volatility and thus ensure grid stability. At present, reserve capacities of conventional fossil power plants are largely used for this purpose. In the future, electric storage or synthetic natural gas produced from hydrogen will be used for this purpose in an increasing degree.
For example, the German government sees great potential in the development of electrochemical medium-capacity electricity storage facilities and has provided funding of around €25 million for further research into this technology in 2018
Natural gas also supports the energy turnaround
Natural gas is another important component of a sustainable energy system transformation. This energy source has a relatively low CO2 footprint, is comparatively cheap and is available in the long term. Compared to most alternative sources, gas also has the advantage that power generation can be easily regulated and is capable of meeting base load requirements.
It is true that the share of natural gas in global electricity generation is expected to decline slightly between 2018 and 2028 (from 23% to 22%). In absolute terms, however, the generation capacity of gas-fired power plants is expected to increase by around 1,300 TWh (2018: 6,101 TWh; 2028: 7,401 TWh).
Worldwide orders for natural gas power plants in 2019 rose for the first time in three years. The order volume was approximately 42 GW, which corresponds to an increase of about 10 GW over the previous year. This increase was primarily triggered by orders from North America, the Middle East and China.
While the conditions for the construction of gas-fired power plants in North America have improved due to the increasing supply of low-cost fracking gas, the Chinese market is benefiting from a better availability of liquified natural gas (LNG) as well as from political initiatives to improve environmental quality. As part of these measures older coal-fired power plants were shut down and replaced by modern gas-fired units.
The energy market will continue to change
The energy market will continue to change fundamentally in the coming years. Growth opportunities are mainly in the emerging markets, whose energy requirements will continue to increase due to high population growth and rising affluence in many countries. In the saturated markets in Europe and North America, the aim is to decarbonize energy systems almost completely through the use of renewable energies and maximum energy efficiency.
But flexible gas-fired power plants will also play an important role as a supplement to a system based mainly on renewable sources. There are also large gas storage facilities that could serve as a safeguard in such a system. Natural gas thus assumes an important role as a bridging technology in the energy system transition and could itself be gradually decarbonized by adding renewable gases to existing natural gas networks.
Hydrogen also has the potential to contribute to the success of the energy turnaround in the future. In power-to-gas plants, for example, green hydrogen can be produced from regenerative electricity by electrolysis. At least in Europe, this hydrogen can be easily stored in the existing natural gas networks and transported to power plants via pipelines. Alternatively, it is possible to produce hydrogen from natural gas. The resulting carbon dioxide can be captured and stored.
In order for such a hydrogen economy to become reality, it is however essential that a reliable regulatory framework is set by politics.The plant construction sector has already created the necessary technical prerequisites for this and is available as competent partner for a sustainable energy system transformation.